12 Typical Closing Costs for Sellers in the State of Alabama

If you’re about to close on your Alabama home sale, you’re likely wondering how much you’ll owe in closing costs. Nationally, sellers typically pay between 6% to 10% of the property’s sale price in closing costs. Since Alabama’s average sale price sits around $147,500, sellers pay $8,850 to $14,750 in closing costs on average.

To help you get a clearer picture of the closing costs for sellers in Alabama, HomeLight interviewed a leading Alabama real estate agent to put together this comprehensive guide.

Alabama sellers almost always pay these costs

Some closing costs are negotiable or unique to particular home sales. However, most Alabama sellers are on the hook for the following:

1. Mortgage payoff

Alabama has a homeownership rate of 68.8%, and around 67% of these homes have outstanding mortgage debt, meaning that most homeowners will have to pay off their mortgage in order to finalize a sale. Alabama is one of the states with the least average amount of residential mortgage debt, with an average outstanding loan balance of $140,963 in 2020; this is likely since the state has a lower median home value than most.

Typically, sellers use their home sale earnings to pay off their mortgage and other closing costs. Considering that housing prices in Alabama have increased by around 34% over the past five years, you may even pocket a significant profit from your sale if you have substantial equity.

2. Property taxes

Chris Walker, a top Alabama real estate agent who completes 14% more sales than his peers, explains that Alabama homeowners pay property taxes to both the state and local governments. On average, Alabama property owners typically only pay about 0.27% of their home’s value in combined property taxes.

According to Walker, state taxes are paid by the calendar year, while local taxes are paid in arrears yearly (for a period between October 1 and September 31). The Alabama Department of Revenue states that these taxes are due at the beginning of October and are considered delinquent after December 31. To find out more about taxes specific to your locality, search for your county area here.

When you sell your home, your taxes are prorated to the day of sale, meaning you’ll only pay taxes for the days of the fiscal year that you owned your home.

3. Transfer taxes

To transfer the ownership of your property to the buyer, you’ll need to pay a state deed recordation tax. Statewide, the rate for transferring a deed is 0.1% of the home’s sale price, while a mortgage transfer is 0.15%. Walker shares that it’s very uncommon in Alabama for homebuyers to assume the seller’s mortgage, so you’ll likely only pay 0.1% in state transfer tax.

On top of state deed recordation tax, your county may charge its own transfer tax. The best way to find out about your county’s real estate transfer tax code is to get in touch with your local revenue department.

4. Title search and recording fees

A title search reveals whether or not there are any liens against your property or conflicting ownership claims that would prevent you from selling.

Title searches typically cost around $75 to $100; sellers and buyers customarily split this fee in Alabama. Walker points out that the exception to this rule is if you sell your home to a cash buyer, in which case you’re typically expected to pay for the title search and recording fees.

5. Title insurance

Apart from title search and recording, sellers are also generally expected to pay half of the title insurance premium. Title insurance protects buyers and lenders in the instance a person or business not identified in the title search claims ownership of the property.

To give you an idea of cost, the premium for an average home in Birmingham is around $800. The cost of your title insurance may vary depending on your location, the value of the property, and the buyer’s mortgage details.

6. Attorney fees

Alabama state law requires a licensed attorney to draft and prepare all legal documents. Consequently, an attorney needs to handle the legal paperwork of all home sales in the state. On average, real estate attorneys charge anywhere between $150 to $450 per hour, but some may also offer a flat fee for standard closing documents. Walker tells us that, in Alabama, attorney’s fees are generally split evenly between buyer and seller.

Since attorney fees can range widely, we recommend using a site like Avvo or Justia to find highly rated real estate attorneys in your area and compare rates.

7. Agent commissions

When it comes to closing costs in Alabama, real estate agent commissions are usually the big-ticket item. Commissions cover services the agents provide like home staging, marketing, Multiple Listing Service access, and more. It’s standard for the seller to pay commission for both their agent and the buyer’s agent; in Alabama, that amount usually runs between 5% to 6% of the home’s sale price.

While that might seem like a high price to pay at first glance, HomeLight’s research shows that the top 5% of real estate agents sell homes for as much as 10% more than their peers — meaning these agents pay for themselves and then some.

Alabama sellers may pay these additional closing costs

With home sales, it all comes down to the particulars, and closing costs are no exception. While these additional closing costs may not apply to every sale, they are fairly common for Alabama sellers.

8. Tax withholding for non-resident sellers

This state tax for non-resident sellers reduces the net proceeds of your sale. If you are a non-resident selling property in Alabama, the state will withhold 3% of the sale price during your transaction, much like how your employer withholds taxes on your paycheck.

During the tax year that you sold your Alabama property, you’ll need to file an Alabama State tax return. At this time, the state determines how much money you owe in taxes on your sale depending on the sale price of your property and other factors.

9. Home warranty

Walker shares that Alabama sellers often purchase a year-long home warranty for buyers. These warranties cover various maintenance issues that pop up like plumbing leaks, air conditioning issues, electrical shorts, and more. Usually, these warranties cost the seller around $540, or $45 paid monthly throughout the year.

10. HOA fees

Only around 14% of Alabama homeowners live in a neighborhood governed by a homeowner’s association (HOA). If your home is under an HOA, you usually pay a prorated amount for your dues. Typically, HOAs charge dues monthly, so you’ll likely only pay for however many days in the month passed before closing. In Alabama, HOA dues are usually around $200 to $300 per month.

11. Termite bond

Termites are a common pest in Alabama and throughout the southern states. Many homes in Alabama have a “termite bond” or a contract with a pest control company to treat any active termite infestations in the home.

As a standard part of the home sale process, the buyer hires professionals to conduct a termite inspection and issue a “termite letter,” a legal document verifying that the building has been inspected for termites. If there’s any damage or active infestations, the seller either purchases a new termite bond or transfers their current bond to the buyer. Termite bonds usually cost around $600, according to Walker.

12. Outstanding debts

If your title search shows that there are liens against your property, you’ll need to settle up before the property can change hands. You may have a lien on your home from unpaid federal taxes, home maintenance bills, gambling debts, and more.

Additionally, you may need to pay overdue property taxes or any other debt keeping you from passing sole legal ownership of your property.

Looking for a better idea of what you’ll pay to sell your Alabama home? Get a quick estimate

During closing, you’ll receive a settlement statement, a document with an itemized list of all the costs you’re covering. If you’re like most Alabama residents, the final price tag of closing costs should settle at 7% to 10% of your home’s value.

For an easy summary of your closing costs and net home sale proceeds, plug your sale details into HomeLight’s Net Proceeds Calculator. By using your home’s value, outstanding mortgage amount, location, and other information, our calculator provides a ballpark estimate of how much money you’ll make on your home sale.

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